Annual Report for the Year Ended 30 June 2011

Annual Report for the Year Ended 30 June 2011

Table of contents

1. Cover page
2. Mai te Manahautū/From the Chief Executive
3. He Kupu Whakataki/Introduction
4. Statement of Responsibility
5. Key Outcome Indicators
6. Key Impact Measures - 2010/11
7. Audit Report
8. Statement of Service Performance
9. Organisational Health and Capability
10. Financial Statements
11. Notes to the Financial Statements

Notes to the Financial Statements

Note 1: Statement of accounting policies

Reporting entity

Te Puni Kōkiri is a Government Department as defined by section 2 of the Public Finance Act 1989. Accordingly, Te Puni Kōkiri has designated itself as a public benefit entity for the purposes of New Zealand equivalents to International Financial Reporting Standards (NZ IFRS).

The financial statements of the department are for the year ended 30 June 2011. The financial statements were authorised for issue by the Chief Executive of Te Puni Kōkiri on 30 September 2011.

In addition, Te Puni Kōkiri has reported the Crown activities that it administers.

Statement of compliance

The financial statements of Te Puni Kōkiri have been prepared in accordance with the requirements of the Public Finance Act 1989, which includes the requirement to comply with New Zealand generally accepted accounting practices (NZ GAAP) and Treasury instructions.

These financial statements have been prepared in accordance with, and comply with, NZ IFRS as appropriate for public benefit entities. The accounting policies set out below have been applied consistently to all periods presented in these financial statements. The financial statements have been prepared on an historical cost basis, modified by the revaluation of certain assets and liabilities as identified in this statement of accounting policies.

The financial statements are presented in New Zealand dollars and all values are rounded to the nearest thousand dollars ($000). The functional currency of Te Puni Kōkiri is New Zealand dollars.

Changes in accounting policies

Accounting policies are changed only if the change is required by a standard or interpretation or otherwise provides more reliable and more relevant information. There have been no changes in accounting policies. All policies have been applied on a basis consistent with the previous year.

The Ministry has adopted the following revisions to accounting standards during the financial year, which have had only a presentational or disclosure effect:

Early adoption of the revised NZ IAS 24 related party disclosures

Te Puni Kōkiri has early adopted NZ IAS 24 Related Party Disclosures (Revised 2009). The effect of early adopting the revised NZ IAS 24 is:

• more information is required to be disclosed about transactions between the Ministry and entities controlled, jointly controlled, or significantly influenced by the Crown;
• commitments with related parties require disclosure; and
• information is required to be disclosed about any related party transactions with Ministers of the Crown with portfolio responsibility for the Ministry. An exemption is provided from reporting transactions with other Ministers of the Crown.

Standards, amendments, and interpretations issued that are not yet effective and have not been early adopted

Standards, amendments, and interpretations issued but not yet effective that have not been early adopted, and which are relevant to Te Puni Kōkiri, are:

• NZ IFRS 9 Financial Instruments will eventually replace NZ IAS 39 Financial Instruments: Recognition and Measurement. NZ IAS 39 is being replaced through the following three main phases: Phase 1 Classification and Measurement, Phase 2 Impairment Methodology, and Phase 3 Hedge Accounting. Phase 1 has been completed and has been published in the new financial instrument standard NZ IFRS 9. NZ IFRS 9 uses a single approach to determine whether a financial asset is measured at amortised cost or fair value, replacing the many different rules in NZ IAS 39. The approach in NZ IFRS 9 is based on how an entity manages its financial assets (its business model) and the contractual cash flow characteristics of the financial assets. The financial liability requirements are the same as those of NZ IAS 39, except for when an entity elects to designate a financial liability at fair value through the surplus or deficit. The new standard is required to be adopted for the year ended 30 June 2014. The Ministry has not yet assessed the effect of the new standard and expects it will not be early adopted.
• FRS-44 New Zealand Additional Disclosures and Amendments to NZ IFRS to harmonise with IFRS and Australian Accounting Standards (Harmonisation Amendments) - These were issued in May 2011 with the purpose of harmonising Australia and New Zealand’s accounting standards with source IFRS and to eliminate many of the differences between the accounting standards in each jurisdiction. The amendments must first be adopted for the year ended 30 June 2012. The Ministry has not yet assessed the effects of FRS-44 and the Harmonisation Amendments

As the External Reporting Board is to decide on a new accounting standards framework for public benefit entities, it is expected that all new NZ IFRS and amendments to existing NZ IFRS with a mandatory effective date for annual reporting periods commencing on or after 1 January 2012 will not be applicable to public benefit entities. This means that the financial reporting requirements for public benefit entities are expected to be effectively frozen in the short-term. Accordingly, no disclosure has been made about new or amended NZ IFRS that exclude public benefit entities from their scope.

Significant Accounting Policies

The following particular accounting policies that materially affect the measurement of financial results and financial position have been applied.

The accrual basis of accounting has been used unless otherwise stated.

Revenue

Te Puni Kōkiri derives revenue through the provision of outputs to the Crown and for services to third parties. Revenue is measured at the fair value of consideration received. Revenue earned from the supply of outputs to the Crown is recognised as revenue when earned.

Capital charge

The capital charge is recognised as an expense in the period to which the charge relates.

Operating Leases

Leases where the lessor effectively retains substantially all the risks and benefits of ownership of the leased items are classified as operating leases. Lease payments under an operating lease are recognised as an expense on a straight line basis over the lease term.

Financial Instruments

Te Puni Kōkiri is party to financial instruments as part of its normal operations. These financial instruments include bank accounts, debtors and creditors. All financial instruments are recognised in the Statement of Financial Position and all revenue and expenses in relation to financial instruments are recognised in the Statement of Comprehensive Income.

Designation of financial assets and financial liabilities by individual entities into instrument categories is determined by the business purpose of the financial instruments, policies and practices for their management, their relationship with other instruments and the reporting costs and benefits associated with each designation.

All foreign exchange transactions are translated at the rates of exchange applicable in each transaction. Te Puni Kōkiri does not carry any balances in foreign currencies.

Cash and cash equivalents

Cash includes cash on hand and funds on deposit with banks and is measured at face value.

Debtors and other receivables

Debtors and other receivables are initially measured at fair value and subsequently measured at amortised cost using the effective interest rate, less impairment changes.

Impairment of a receivable is established when there is objective evidence that the Ministry will not be able to collect amounts due according to the original terms of the receivable. Significant financial difficulties of the debtor, probability that the debtor will enter into bankruptcy, and default in payments are considered indicators that the debtor is impaired. The amount of the impairment is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted using the original effective interest rate. The carrying amount of the asset is reduced through the use of an allowance account, and the amount of the loss is recognised in the statement of comprehensive income. Overdue receivables that are renegotiated are reclassified as current (i.e. not past due).

Property, Plant and Equipment

Property, plant and equipment consist of leasehold improvements, furniture and office equipment, EDP hardware, software that are an integral part of running the hardware, and motor vehicles. Property, plant and equipment is shown at cost less accumulated depreciation and impairment losses.

Individual assets, or group of assets, are capitalised if their cost is greater than $5,000. The value of an individual asset that is less than $5,000 and is purchased as part of a group of similar assets is capitalised.

Additions

The cost of an item of property, plant and equipment is recognised as an asset if it is probable that future economic benefits or service potential associated with the item will flow to the Ministry and the cost of the item can be measured reliably.

Work in progress is recognised at cost less impairment and is not depreciated.

In most instances, an item of property, plant and equipment is recognised at its cost. Where an asset is acquired at no cost, or for a nominal cost, it is recognised at fair value as at the date of acquisition

Disposals

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount of the asset. Gains and losses on disposals are included in the statement of comprehensive income in the period in which the transaction occurs. When revalued assets are sold, the amounts included in the property, plant and equipment revaluation reserves in respect of those assets are transferred to general funds.

Subsequent costs

Costs incurred subsequent to initial acquisition are capitalised only when it is probable that future economic benefits or service potential associated with the item will flow to the Ministry and the cost of the item can be measured reliably.

Depreciation

Depreciation is provided on a straight-line basis on all property, plant and equipment, at rates that will write off the cost of the assets to their estimated residual values over their useful lives. The useful lives and associated depreciation rates of major classes of assets have been estimated as follows:

^{* Leasehold improvements are depreciated over the unexpired period of the lease or the estimated remaining useful lives of the improvements, whichever is the shorter.}

Intangible Assets

Software acquisition and development

Acquired computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. Costs associated with maintaining computer software are recognised as an expense when incurred. Costs that are directly associated with the development of software for internal use by the Ministry, are recognised as an intangible asset. Direct costs include the software development, employee costs and an appropriate portion of relevant overheads. Staff training costs are recognised as an expense when incurred.

Amortisation

The carrying value of an intangible asset with a finite life is amortised on a straightline basis over its useful life. Amortisation begins when the asset is available for use and ceases at the date that the asset is derecognised. The amortisation charge for each period is recognised in the Statement of Comprehensive Income. The useful lives and associated amortisation rates of major classes of intangible assets have been estimated as follows:

Impairment of property, plant and equipment and intangible assets

Intangible assets that have an indefinite useful life or not yet available for use at the balance sheet date is tested for impairment annually.

Property, plant and equipment and intangible assets that have a finite useful life are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use.

Value in use is depreciated replacement cost for an asset where the future economic benefits or service potential of the asset are not primarily dependent on the asset’s ability to generate net cash inflows and where the entity would, if deprived of the asset, replace its remaining future economic benefits or service potential.

If an asset’s carrying amount exceeds its recoverable amount, the asset is impaired and the carrying amount is written down to the recoverable amount. The total impairment loss is recognised in the statement of comprehensive income.

Creditors and other payables

Creditors and other payables are initially measured at fair value and subsequently measured at amortised cost using the effective interest method.

Employee entitlements

Short-term employee entitlements

Employee entitlements that the Ministry expects to be settled within 12 months of balance date are measured at nominal values based on accrued entitlements at current rates of pay. These include salaries and wages accrued up to balance date, annual leave earned but not yet taken at balance date, retiring and long service leave entitlements expected to be settled within 12 months, and sick leave.

Te Puni Kōkiri recognises a liability for sick leave to the extent that absences in the coming year are expected to be greater than the sick leave entitlements earned in the coming year. The amount is calculated based on the unused sick leave entitlement that can be carried forward at balance date, to the extent that the Ministry anticipates it will be used by staff to cover those future absences.

The Ministry recognises a liability and an expense for performance payments where the Ministry has a contractual obligation or where there is a past practice that has created a constructive obligation.

Long-term employee entitlements

Entitlements that are payable beyond 12 months, such as long service leave and retiring leave, have been calculated on an actuarial basis. The calculations are based on:

• likely future entitlements based on years of service, years to entitlement, the likelihood that staff will reach the point of entitlement and contractual entitlements information; and
• the present value of the estimated future cash flows.

Presentation of employee entitlements

Sick leave, annual leave, vested long service leave, and non-vested long service leave and retirement gratuities expected to be settled within 12 months of balance date are classified as a current liability. All other employee entitlements are classified as a noncurrent liability.

Superannuation schemes

Defined contribution schemes

Obligations for contributions to the State Sector Retirement Savings Scheme, KiwiSaver and the Government Superannuation Fund are accounted for as defined contribution schemes and are recognised as an expense in the statement of comprehensive income as incurred.

Provisions

The Ministry recognises a provision for future expenditure of uncertain amount or timing when there is a present obligation (either legal or constructive) as a result of a past event, it is probable that an outflow of future economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. Provisions are not recognised for future operating losses.

Provisions are measured at the present value of the expenditures expected to be required to settle the obligation using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised as a finance cost.

Taxpayers’ funds

Taxpayers’ funds is the Crown’s investment in the Ministry and is measured as the difference between total assets and total liabilities.

Commitments

Expenses yet to be incurred on noncancellable contracts that have been entered into on or before balance date are disclosed as commitments to the extent that there are equally unperformed obligations.

Cancellable commitments that have penalty or exit costs explicit in the agreement on exercising that option to cancel are included in the statement of commitments at the value of that penalty or exit cost.

Goods and services tax (gst)

All items in the financial statements, including appropriation statements, are stated exclusive of GST, except for receivables and payables, which are stated on a GST inclusive basis. Where GST is not recoverable as input tax, then it is recognised as part of the related asset or expense.

The net amount of GST recoverable from, or payable to, the Inland Revenue Department (IRD) is included as part of receivables or payables in the statement of financial position. The net GST paid to, or received from the IRD, including the GST relating to investing and financing activities, is classified as an operating cash flow in the statement of cash flows.

Commitments and contingencies are disclosed exclusive of GST.

Income Tax

Government departments are exempt from income tax as public authorities. Accordingly, no charge for income tax has been provided for.

Contingent assets and liabilities

Contingent assets and liabilities are disclosed at the point at which the contingency is evident. Contingent liabilities are disclosed if the possibility that they will crystallise is not remote. Contingent assets are disclosed if it is probable that the benefits will be realised.

Net operating surplus

The net operating surplus for the period is repayable to the Crown and a provision for this repayment is shown in the Statement of Financial Position.

Budget figures

The budget figures are those included in the Ministry’s Forecast Financial Statement published in the Information Supporting the Estimates of Appropriation for the year ending 30 June 2011. In addition, the financial statements also present the updated budget information from the 2010/11 Supplementary Estimates.

Statement of cost accounting policies

Te Puni Kōkiri has determined the cost of outputs using the cost allocation system outlined below.

Criteria for direct costs

Direct costs’ are those costs that are directly attributed to an output.

Criteria for indirect costs

‘Indirect costs’ are those costs that cannot be attributed in an economically feasible manner, to a specific output.

These include depreciation and capital charge which are charged to outputs on the basis of fulltime equivalents (FTEs) attributable to each output.

Personnel costs (excluding those of Support Services Wāhanga and the Office of the Chief Executive) are allocated to outputs based on budgeted FTEs attributable to each output. Property and other premises costs, such as maintenance, are charged to wāhanga (business units) on the basis of budgeted FTEs. Corporate overheads are allocated to outputs on the basis of budgeted FTEs attributable to each output.

There have been no changes in cost accounting policies since the date of the last audited financial statements.

Critical accounting estimates and assumptions

In preparing these financial statements, estimates and assumptions have been made concerning the future. These estimates and assumptions may differ from the subsequent actual results. Estimates and assumptions are continually evaluated and are based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. The estimates and assumptions that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year are referred to below:

Retirement and long service leave

An analysis of the exposure in relation to estimates and uncertainties surrounding retirement and long service leave liabilities is disclosed in note 11.

Critical judgements in applying the Ministry’s accounting policies

Management has not exercised any critical judgements in applying the Ministry’s accounting policies for the period ended 30 June 2011.

Note 2: Other Revenue

Note 3: Personnel Costs

Note 4: Operating Costs

*Consultancy Fees include the cost of research, which in 2010/11 included the Action Research Programme for Whānau Ora $2.154m (Nil in 2009/10).

Note 5: Depreciation Charge

Note 6: Capital Charge

346Te Puni Kōkiri pays a capital charge to the Crown on its taxpayers’ funds as at 30 June and 31 December each year. The capital charge rate for the year ended 30 June 2011 was 7.5% (2010: 7.5%).347

Note 7: Debtors and Other Receivables

The carrying value of debtors and other receivables approximates their fair value.

The provision for impairment has been calculated based on a collective assessment of all receivables.

The collective impairment provision is based on an analysis of past collection history and debt write-offs.

There is a nil provision for impairment as of 30 June 2011 (Nil for 2010).

Note 9 : Intangible Assets

Note 10: Creditors and Payables

Note 11: Employee Entitlements

For the calculation of long service leave, discount rates of 2.84% for year 1, 3.81% for year 2 and 6.00% for year 3 and onwards with a long term salary inflation factor of 3.5% were used. These rates and the model for calculations were provided by the Treasury.

Note 12: Provision for Restructure

The restructuring provision relates to review of the support functions performed by the Support Services Wāhanga. Management anticipate that the restructuring will be completed within 12 months of balance date.

Note 13: Related party transactions and key management personnel

Te Puni Kōkiri is a wholly owned entity of the Crown. The Government significantly influences the roles of Te Puni Kōkiri as well as being its major source of revenue.

Significant transactions with government-related entities
Te Puni Kōkiri has received funding from the Crown of $60m (2010 $54m) to provide services to the public for the year ended 30 June 2011.

 Collectively, but not individually, significant transactions with government-related entities
In conducting its activities, Te Puni Kōkiri is required to pay various taxes and levies (such as GST, FBT, PAYE, and ACC levies) to the Crown and entities related to the Crown. The payment of these taxes and levies, other than income tax, is based on the standard terms and conditions that apply to all tax and levy payers. Te Puni Kōkiri is exempt from paying income tax.

Te Puni Kōkiri enters into transactions with other government departments, Crown entities and state-owned enterprises on an arm’s length basis. Those transactions that occur within a normal supplier or client relationship on terms and conditions no more or less favourable than those which it is reasonable to expect Te Puni Kōkiri would have adopted if dealing with that entity at arm’s length in the same circumstance are not disclosed.

Te Puni Kōkiri also purchases goods and services from entities controlled, significantly influenced, or jointly controlled by the Crown. Purchases from these government-related entities for the year ended 30 June 2011 totalled $2.4 million (2009/10 $1.9 million). These purchases included the purchase of electricity from Genesis and Meridian, air travel from Air New Zealand, legal services from Crown Law Office, postal services from New Zealand Post, ACC levies and capital charge paid to the Treasury

Transactions with related parties

Te Puni Kōkiri staff
Te Puni Kōkiri staff who work in local communities may in a private capacity hold executive or advisory positions in local organisations. Some of these organisations may receive funding via Te Puni Kōkiri. These organisations are therefore considered related parties of Te Puni Kōkiri.

Te Puni Kōkiri staff are required to declare any real or potential conflicts of interest. Steps are then taken to ensure that staff members with a conflict of interest are not involved in any Te Puni Kōkiri decisions involving a group/organisation they may be involved with in a private capacity. No provision has been required, nor any expense recognised, for impairment of receivables from related parties.

Ministerial Economic Taskforce
The Ministerial Economic Taskforce was established in March 2009 to take forward the ideas presented at the Māori Economic Workshop in January 2009. The Taskforce is chaired by the Minister of Māori Affairs and comprises seven independent members.

During 2010/11, Te Puni Kōkiri has entered into transactions with organisations associated with Taskforce members on an arm’s length basis. The individual Taskforce members were precluded from Taskforce decisions on endorsement of the respective projects.

Significant projects that occurred within a normal supplier or client relationship on terms and conditions no more or less favourable than those which it is reasonable to expect Te Puni Kōkiri would have adopted if dealing with those entities at arm’s length in the same circumstance are disclosed below.

Te Roopu Pakihi
Te Puni Kōkiri entered into a Māori Potential Fund contract with Te Roopu Pakihi for $304,000 (GST exclusive) for the period December 2009 to April 2010. The remaining value of the contract was $64,000 at the end of June 2010. It has been fully paid in 2010/11.

 The contract was to ‘form a national association of regional Māori Business Networks; establish a Local Partnership Support Programme; and complete ‘He Hapori Whakatupu Mātauranga’ - a Māori framework which identifies community needs and provides developmental opportunities.’

Daphne Luke was a member of the Māori Economic Taskforce and chair of its Small and Medium sized Enterprises Workstream. She had also provided project management services to Te Roopu Pakihi as part of this project.

Key management personnel compensation

Key management personnel include the Chief Executive and the four members of the Executive Leadership Team (ELT). The 2010/11 financial year includes the full year impact of the new position for Deputy Secretary Whānau and Social Policy and appointments to two vacant deputy secretary positions, occurring late 2009/10 and early 2010/11.

Key management personnel compensation excludes the remuneration and other benefits the Minister of Māori Affairs, the Associate Minister of Māori Affairs and the Minister Responsible for Whānau Ora receive. The Ministers’ remuneration and other benefits are set by the Remuneration Authority under the Civil List Act 1979 and are paid under Permanent Legislative Authority (PLA), and not paid by Te Puni Kōkiri.

There were no related party transactions involving key management personnel in 2010/11 (nil 2009/10).

Note 14: Capital Management

Te Puni Kōkiri’s capital is its taxpayers’ funds, which is represented by net assets.

The Ministry manages its revenue, expenses, assets, liabilities and general financial dealings prudently. Its equity is largely managed as a by-product of managing the above, as well as compliance with the Government budget processes and Treasury instructions.

The objective of managing the Ministry’s equity is to ensure the Ministry effectively achieves its goals and objectives for which it has been established, whilst remaining a going concern.

Note 15: Explanation for Significant Budget Changes

Refer to “The Supplementary Estimates of Appropriations for the year ending 30 June 2011” for an explanation of significant budget changes between the 2010 Main Estimates and 2010/11 Supplementary Estimates for Vote Māori Affairs (B.7 - Pages 607 and 613).

Note 16: Explanation for Significant Variances

The following notes explain significant variances between Main Estimates and Actuals.

Statement of Comprehensive Income (page 70)

Personnel: The variance is mainly due to positions remaining vacant and/or taking longer than expected to be recruited to, given the specialist nature of a number of Te Puni Kōkiri’s position descriptions.

Operating: The variance is largely due to a combination of higher contractor costs covering vacancies until permanent appointments were made, additional funding received in the supplementary estimates for Te Waka showcasing and festival programmes for the Rugby World Cup and Te Puni Kōkiri’s relief effort for the Christchurch earthquake.

Statement of Financial Position (page 71)

Cash and cash equivalents: The increase in cash is largely due to the Net Operating surplus, higher than anticipated creditors and other payables at year end and deferral of asset purchases.

Property, plant and equipment: The under spend is largely due to the decision to defer the purchase of 32 motor vehicles, a number of EDP hardware and Leasehold Improvement assets.

Creditors and Payables: The variance is a result of higher year end accruals than originally forecast.

Statement of Departmental Expenditure and Capital Expenditure Appropriations (page 77)

The variances above for departmental expenditure largely reflect the fiscally neutral transfers between departmental appropriations actioned by Te Puni Kōkiri in the 2011 March Baseline Update.

This was the result of reprioritisation of our work programme to provide a sharpened focus on achieving Treaty Settlements by 2014; implementation of Whānau Ora; enhancing Māori economic performance; supporting Māori culture and indigeneity; and advising on and supporting enhanced Crown-Māori relationships.

The underspend for departmental capital expenditure reflects the decision to defer the replacement of 32 motor vehicles, a number of EDP hardware and leasehold improvement assets.

Note 17: Financial instrument

The Ministry’s activities expose it to a variety of financial instrument risks, including market risk, credit risk and liquidity risk. The Ministry has a series of policies to manage the risks associated with financial instruments and seeks to minimise exposure from financial instruments. These policies do not allow any transactions that are speculative in nature to be entered into.

Market risk

Currency risk
Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in foreign exchange rates.

The Ministry’s foreign exchange management policy requires the Ministry to manage currency risk arising from future transactions and recognised liabilities by covering all material foreign exchange exposures as soon as they arise with approved instruments and counterparties.

The Ministry considers foreign exchange exposure to be material where the transaction exposure limit for an individual currency exceeds NZ$100,000.

The Ministry has two approved instruments that can be used to cover foreign exchange exposure;

• Spot foreign exchange contract for not more than two business day settlements; and
• Forward foreign exchange contract for settlement at a future date.

The Ministry’s policy has been approved by the Treasury and is in accordance with the requirements of the Treasury Guidelines for the Management of Crown and Departmental Foreign-Exchange Exposure.

The Ministry has minimal exposure to currency risk. Foreign exchange exposure is predominantly limited to:

• Personnel based overseas e.g. training and secondments;
• Accommodation and other costs related to international travel (including travel advances paid in foreign currency); and
• Purchasing goods and services from foreign suppliers’ e.g. international consultants and journal subscriptions

Interest rate risk
Interest rate risk is the risk that the fair value of a financial instrument will fluctuate, or the cash flows from a financial instrument will fluctuate, due to changes in market interest rates.

The Ministry has no interest bearing financial instruments and, accordingly, has no exposure to interest rate risk

Credit risk

Credit risk is the risk that a third party will default on its obligation to the Ministry, causing the Ministry to incur a loss.

In the normal course of its business, credit risk arises from debtors, deposits with banks and derivative financial instrument assets.

The Ministry is only permitted to deposit funds with Westpac, a registered bank, and enter into foreign exchange spot and forward contracts with the New Zealand Debt Management Office or any counterparty that meets the minimum credit rating criteria. These entities have high credit ratings. For its other financial instruments, the Ministry does not have significant concentrations of credit risk.

The Ministry’s maximum credit exposure for each class of financial instrument is represented by the total carrying amount of cash and cash equivalents and net debtors. There is no collateral held as security against these financial instruments, including those instruments that are overdue or impaired.

Liquidity risk

Liquidity risk is the risk that the Ministry will encounter difficulty raising liquid funds to meet commitments as they fall due.

In meeting its liquidity requirements, the Ministry closely monitors its forecast cash requirements with expected cash drawdowns from the New Zealand Debt Management Office. The Ministry maintains a target level of available cash to meet liquidity requirements.

The table below analyses the Ministry’s financial liabilities that will be settled based on the remaining period at balance sheet date to the contractual maturity date. The amounts disclosed are the contractual undiscounted cash flows, which is also the carrying amount.

Non-departmental statements and schedules for the year ended 30 June 2011

The following non-departmental statements and schedules record the income, expenses, assets, liabilities, commitments and contingent assets and liabilities that the Ministry manages on behalf of the Crown

Schedule of non-departmental revenue for the year ended 30 June 2011

The Schedule of Non-Departmental Revenue shows budgeted revenue against actual revenue. Figures are GST exclusive

^{The accompanying notes form part of these financial statements. For a full understanding of the Crown’s financial position and the results of its operations for the year, refer to the consolidated Financial Statements of the Government for the year ended 30 June 2011}

Schedule of non-departmental expenses for the year ended 30 June 2011

The Schedule of Expenses summarises Non-Departmental expenses that Te Puni Kōkiri administers on behalf of the Crown. Further details are provided in the Statement of Non-Departmental Expenditure and Capital Expenditure Appropriations on pages 102-103. Figures are GST exclusive.

The accompanying notes form part of these financial statements. For a full understanding of the Crown’s financial position and the results of its operations for the year, refer to the consolidated Financial Statements of the Government for the year ended 30 June 2011.

Statement of non-departmental expenditure and capital expenditure appropriations for the year ended 30 June 2011

The Statement of Non-Departmental Expenditure and Capital Expenditure Appropriations shows expenditure and capital payments incurred against funds appropriated by Parliament. Te Puni Kōkiri administers these appropriations on behalf of the Crown. Figures are GST exclusive.

Explanations of major variances against budget are detailed in note 4.

^{The accompanying notes form part of these financial statements. For a full understanding of the Crown’s financial position and the results of its operations for the year, refer to the consolidated Financial Statements of the Government for the year ended 30 June 2011.}

Statement of non-departmental unappropriated expenditure and capital expenditure as at 30 June 2011

There was no unappropriated expenditure for the year ended 30 June 2011 ($7.0 million for the year ended 30 June 2010).

^{The accompanying notes form part of these financial statements. For a full understanding of the Crown’s financial position and the results of its operations for the year, refer to the consolidated Financial Statements of the Government for the year ended 30 June 2011.}

Schedule of non-departmental assets as at 30 June 2011

Non-Departmental assets are administered by Te Puni Kōkiri on behalf of the Crown. As these assets are neither controlled by Te Puni Kōkiri nor used in the production of Te Puni Kōkiri outputs, they are not reported in the department’s Statement of Financial Position.

Non-Departmental Assets administered by Te Puni Kōkiri on behalf of the Crown include:

Schedule of non-departmental liabilities as at 30 June 2011

An explanation of major variances against budget is detailed in note 4.

^{The accompanying notes form part of these financial statements. For a full understanding of the Crown’s financial position and the results of its operations for the year, refer to the consolidated Financial Statements of the Government for the year ended 30 June 2011.}

Schedule of non-departmental commitments as at 30 June 2011

The Schedule of Non-Departmental Commitments shows the future contractual obligations (exclusive of GST) that will become liabilities if and when the terms and conditions of existing contracts are met.

Statement of non-departmental contingent assets and liabilities as at 30 June 2011

The Statement of Non-Departmental Contingent Assets and Liabilities shows amounts at balance date that could potentially become assets or liabilities depending on the occurrence of one or more uncertain future events after 30 June 2011. It does not include general or unspecified business risks or conditions.

Contingent liabilities

The Ministry on behalf of the Crown has no contingent liabilities as at 30 June 2011 (2009/10 nil).

Contingent assets

The Ministry on behalf of the Crown has no contingent assets as at 30 June 2011 (2009/10 nil).

^{The accompanying notes form part of these financial statements. For a full understanding of the Crown’s financial position and the results of its operations for the year, refer to the consolidated Financial Statements of the Government for the year ended 30 June 2011.}

Notes to the non-departmental financial statements

Note 1: Statement of Non-Departmental Accounting Policies

These non-departmental statements and schedules record the expenses, revenue and receipts, assets and liabilities that Te Puni Kōkiri manages on behalf of the Crown.

The Non-Departmental balances are consolidated into the Financial Statements of the Government and therefore readers of these statements and schedules should also refer to the Financial Statements of the Government for 2010/11.

Basis of Preparation
The non-departmental schedules and statements have been prepared in accordance with the accounting policies of the Financial Statements of the Government, Treasury Instructions, and Treasury Circulars.

Measurement and recognition rules applied in the preparation of these non-departmental schedules and statements are consistent with New Zealand generally accepted accounting practice as appropriate for public benefit entities.

There have been no changes in accounting policies during the financial year.

Statement of Compliance
These financial statements have been prepared in accordance with New Zealand generally accepted accounting practice. They comply with NZ IFRS and other applicable Financial Reporting Standards, as appropriate for public benefit entities.

Measurement System
Measurement and recognition rules applied in the preparation of the Non-Departmental statements and schedules are consistent with generally accepted accounting practice and the Financial Statements of the Government’s accounting policies. The financial statements have been prepared on an historical cost basis

The financial statements are presented in New Zealand dollars and all values are rounded to the nearest thousand dollars ($000). The functional currency of Te Puni Kōkiri is New Zealand dollars.

Accounting Policies
The following particular accounting policies that materially affect the measurement of financial results and financial position have been applied

Budget Figures
The budget figures are those presented in the 2009 Main Estimates as amended by the 2009/10 Supplementary Estimates and any transfer made by Order in Council under section 26A of the Public Finance Act 1989.

Revenue Te Puni Kōkiri derives revenue through the provision of outputs to the Crown and for services to third parties. Revenue is measured at the fair value of consideration received.

Revenue from supply of services is recognised at balance date on a straight line basis over the specified period for the services, unless an alternative method better represents the stage of completion of transaction.

Goods and Services Tax (GST) The Statements of Non-Departmental Expenditure and Appropriations are exclusive of GST. The Statement of Financial Position is exclusive of GST, except for Creditors and Payables, and Debtors and Receivables, which are GST inclusive.

The amount of GST owing to or from the Inland Revenue Department at balance date, being the difference between Output GST and Input GST, is included in Creditors and other Payables or Debtors and other Receivables (as appropriate).

Commitments Future expenses and liabilities to be incurred on contracts that have been entered into at balance date are disclosed as commitments to the extent that there are equally unperformed obligations.

Note 2: Revaluation of Crown Land

Te Puni Kōkiri holds a number of Crown land blocks which are intended for disposal. All the land blocks are assessed for material movement in carrying value each year. The land blocks held for sale are revalued annually if there is a change in its disposal status during the year. For land blocks held for sale where there has not been a change, independent valuations are done regularly (3 years). All other land blocks are held at cost. For the 2008/09 financial year, Independent valuations were done by Veitch Morison Valuers Ltd, Garton and Associates, E.I. Clissold and QV Valuations between 26 May 2009 and 8 July 2009.

Note 3: Explanation for Significant Budget Changes

Refer to “The Supplementary Estimates of Appropriations for the year ending 30 June 2011” for an explanation of significant budget changes between the 2010 Main Estimates and 2010/11 Supplementary Estimates for Vote Māori Affairs (B.7 - Pages 614 to 614).

The major changes included:

New appropriations

• Te Waka ($0.822m) - to support the construction of a large transportable even marquee, in the shape of a traditional waka to be located on the Auckland waterfront.
• Taumarunui Lease Compensation ($0.500m) - a one-off ex-gratia payment to the Karanga Te Kere Whānau Trust to address their historical rental losses and omission from the Māori Reserved Land Amendment Act 1997 with respect to reserves in Taumarunui.

Additional appropriations

• Strengthening and Promoting Maori Tourism ($4.500m over three years) - new funding for an action plan that will focus on raising the quality and consistency of Māori tourism products, improving the business capability and performance of Māori tourism operators and better promoting Māori tourism. A total of $1.0m from this appropriation has been transferred to 2013/14.
• Iwi Housing Support ($0.130m) - new funding for part implementation of the Ratana Housing Strategy.

Note 4: Explanation for significant variances

The following notes explain the significant variances between Main Estimates and Actual.

Statement of non-departmental expenditure and capital expenditure

Almost all the non-departmental and capital expenditure appropriations were fully expensed by 30 June 2011 with the exception of the following appropriations, where in-principle expense transfers are in place to enable under spends to be transferred to 2011/12, reflecting the forecast funding profiles. Transfers, up to a maximum of the following amounts can be moved to 2011/12.

1. $11.647m for Whānau Ora based Service Development;
2. $0.292m for Strengthening and Promoting Māori Tourism; and
3. $0.328m for Te Waka

The under-spend in Whānau Ora-based Service Development mainly relates to delivery of the multi-year Programmes of Action. Timelines for the delivery of the Programmes of Action have largely been set by the provider collectives themselves, and only commenced in June 2011.

The Te Waka and Taumarunui Lease Compensation are new appropriations that were appropriated in the Supplementary Estimates of Appropriations for the year ending 30 June 2011.

The Te Ariki Trust appropriation of $0.021m is for the costs of administering the new Te Ariki Trust and was not used in 2010/11 as the trustees had not been appointed.

Schedule of non-departmental assets

The Cash balance as of the Main Estimates included the Crown surpluses from previous years which have since been returned to the NZDMO. This is partially offset by underspends against the Main Estimates and a higher than anticipated level of creditors and other payables at year end.

Schedule of non-departmental liabilities

The variance is a result of higher year end accruals than originally forecast.

Note 5: Financial instruments

The Ministry’s activities expose it to a variety of financial instrument risks, including market risk, credit risk and liquidity risk. The Ministry has a series of policies to manage the risks associated with financial instruments and seeks to minimise exposure from financial instruments. These policies do not allow any transactions that are speculative in nature to be entered into.

Credit risk

Credit risk is the risk that a third party will default on its obligation to the Ministry, causing the Ministry to incur a loss.

In the normal course of its business, credit risk arises from debtors, deposits with banks and derivative financial instrument assets.

The Ministry is only permitted to deposit funds with Westpac, a registered bank, and enter into foreign exchange spot and forward contracts with the New Zealand Debt Management Office or any counterparty that meets the minimum credit rating criteria. These entities have high credit ratings. For its other financial instruments, the Ministry does not have significant concentrations of credit risk.

The Ministry’s maximum credit exposure for each class of financial instrument is represented by the total carrying amount of cash and cash equivalents and net debtors. There is no collateral held as security against these financial instruments, including those instruments that are overdue or impaired.

Note 6: Crown Entities

In addition to the above, the Minister of Māori Affairs receives administration services in respect of the following Crown Entities:

• Te Māngai Pāho
• Te Taura Whiri i te Reo Māori

The investment in these entities is recorded within the Financial Statements of the Government on a line by line basis. No disclosure is made in this schedule.

Please refer to the Annual Reports at the following websites:

Te Māngai Pāho at www.tmp.govt.nz

Māori Television Service at www.maoritelevision.com

Te Taura Whiri i te Reo Māori at www.tetaurawhiri.govt.nz for information on their financial performance and position.

• Back to Financial Statements